THE GAS AND ELECTRIC UTILITY INDUSTRY: CARBON CONSTRAINED Monday, November 30th Track 1 Session 3 This session will focus on the impact U.S. EPA Clean Power Plan (CPP) will play in shaping changes to the natural gas market, including the shale gas marketplace both domestically and perhaps internationally. The inter-dependency between the natural gas and electric industry is growing as there is more movement toward natural gas fired generation and away from coal fired generation. Natural gas companies are already seeing an increased need for infrastructure expansion from the growing gas-electric inter-dependency. What are the benefits and risks facing the natural gas industry? What role does the shale gas industry play? What will the changes mean for gas producers, electric utilities and technology now and in the future both in the U.S and abroad? Track One Changing Dynamics of the Global Energy Landscape: What are the major forces driving the sea-changes occurring in all phases of Energy Systems i.e., Exploration, Generation, Distribution, Consumption, etc; Systems Support to Policy & Decision Makers; Energy Economics and Politics; how will Systems Engineering facilitate decision making? Anurandha Annaswamy from Massachusetts Institute of Technology

1. A Computation Model of the Nexus
between Natural Gas and Electricity
Infrastructures
Active-adaptive Control Laboratory
Department of Mechanical Engineering
Massachusetts Institute of Technology
Anuradha Annaswamy
Joint work with Neha Nandakumar
EnergyTech 2015, Cleveland, November 30, 2015

2. Natural Gas and Electricity Infrastructures
• Gas-fired units are increasing due to:
o reduced footprint and increased efficiency compared to coal,
o higher penetration of volatile renewable power, and
o the need to reduce energy imports from foreign sources.
• Efficient interaction between the two infrastructures is therefore
highly important!
Interdependence
between the two
infrastructures
EnergyTech 2015

3. From the Boston Globe
September 25, 2014
1
Cold weather
High penetration of natural gas
• The price of electricity
increases as the electric
generation mix encompasses
more natural gas
ISO-NE fuel mix on October 29, 2015, 7:10 PM
EnergyTech 2015

4. Consumption of Gas by the Electricity Sector
November 2015 Monthly Energy Review http://www.eia.gov/totalenergy/data/monthly/pdf/mer.pdf
• Electric consumption of
gas increased over the
past few years and
trends expected to
increase
• Electric consumption
greater than
consumption of every
other individual sector
Electric consumers not a
trivial participant in gas
markets
Electric
consumer
RCI
Consumers

5. Implications of Renewable Generation
𝑑𝑒𝑚𝑎𝑛𝑑 𝐺 𝑑 = 𝐺 𝑐𝑜𝑎𝑙 + 𝐺 𝑛𝑢𝑐𝑙𝑒𝑎𝑟 + 𝐺 𝑜𝑖𝑙 + 𝐺𝑔𝑎𝑠 + 𝐺ℎ𝑦𝑑𝑟𝑜+𝐺𝑠𝑜𝑙𝑎𝑟 + 𝐺 𝑤𝑖𝑛𝑑
• With greater retirement of fossil fuel generation and increased penetration of
renewable generation into the electric grid, the reliance on natural gas as a flexible fuel
to accommodate fluctuating renewable generation is increasing
Gas
Renewable
Coal
Nuclear
Generation Mix (as of Nov 28, 2014)
EnergyTech 2015
Gas
Renewable
Oil
Potential Generation Mix with
increasing renewables

6. Interdependency between NG and Electricity Networks
Natural Gas Network IEEE 118-bus Electricity Network
Gas
Marketer
Natural Gas
Power Plant
(NGPP)
ISO-NE
Electric
Dispatch
Renewable
Penetration
• Interaction is affected by
o Material flow
o Market flow
• Material flow – Pipeline architecture, Linepack, Storage
• Market flow – Access to gas for NGPP is primarily in
spot/secondary markets via non-firm contractsEnergyTech 2015

7. RCIT
Natural Gas Infrastructure – Market Model
Marketer (or Pipeline
Operator)
Gas
Producers
Main
Local Distribution
Companies (LDC)
RCI
Consumers
Interstate Pipelines
Marketer (or Pipeline
Operator)
Local Distribution
Companies (LDC)
RCI
Consumers
Distribution Pipelines
Commodity Contracts
Capacity Contracts
Our focus: To develop a computation model depicting
market transactions within the NG-E combined network
NGPP
NGPP

8. Interdependency between NG and Electricity Networks – Market Flow
Gas
Marketer
Natural Gas
Power Plant
(NGPP)
ISO-NE
Electric
Dispatch
Renewable
Penetration
Bilateral transaction
between marketer and
NGPP
NGPP bids to
ISO
NGPP gets
dispatched amount
to produce
Adjustments to
dispatch in real time
markets
IEEE 118-bus Electricity Network
Two main issues:
• Market misalignment
• Unequal access to gas between NGPPs (GenCos) and RCITs (LDCs)
EnergyTech 2015
Natural Gas Network

9. Market misalignment in Day Ahead Market
12:00
am
6:00
am
12:00
pm
6:00
pm
12:00
am
Timely
Nomination
Evening
Nomination
Electric Day
Gas Day New
• Less uncertainty in DAM due to FERC 809 ruling - Genco knows how much gas they
need, and nominate accordingly on the gas day (B occurs after A)
• Unequal access due to non-firm contracts – gas is available only if RCITs release gas
Bids to
ISO Schedule
Posted
A
B
EnergyTech 2015

10. Market misalignment in Real-time Market
12:00
am
6:00
am
12:00
pm
6:00
pm
12:00
am
Intraday
Nomination
1
Timely
Nomination
Intraday
Nomination
2
Intraday
Nomination
3
6:00
am
12:00
pm
6:00
pm
12:00
am
Evening
Nomination
Electric Day
Gas Day New
• Only 3 instances when NGPPs find out if additional gas will be available
• Unequal access – gas is available only if RCITs release gas
• NGPPs may not be able to meet their dispatch
Bids to
ISO
Schedule
Posted
Schedule
Reposted
Re-bid
for gas
EnergyTech 2015

11. Implications of Renewable Generation
0 50 100 150 200 250 300 350
49.88
49.9
49.92
49.94
49.96
49.98
50
50.02
50.04
Time [s]
BusFrequencies[Hz]
• If gas plants cannot meet their dispatch needs hourly and make up for renewable
generation fluctuations, there can be a power imbalance, leading to frequency errors
𝑑𝑒𝑚𝑎𝑛𝑑 𝐺 𝑑 = 𝐺 𝑐𝑜𝑎𝑙 + 𝐺 𝑛𝑢𝑐𝑙𝑒𝑎𝑟 + 𝐺 𝑜𝑖𝑙 + 𝐺𝑔𝑎𝑠 + 𝐺ℎ𝑦𝑑𝑟𝑜+𝐺𝑠𝑜𝑙𝑎𝑟 + 𝐺 𝑤𝑖𝑛𝑑
EnergyTech 2015
Gas
Renewable
Oil
Potential Generation Mix with
increasing renewables

12. Interdependency between NG and Electricity Networks – Unequal access
Natural Gas Network (MA)
Gas
Marketer
Natural Gas
Power Plant
(NGPP)
ISO-NE
Electric
Dispatch
Renewable
Penetration
Bilateral transaction
between marketer and
NGPP
NGPP bids to
ISO
NGPP gets
dispatched amount
to produce
Adjustments to
dispatch in real time
markets
IEEE 118-bus Electricity Network
Two main issues:
• Market misalignment
• Unequal access to gas between NGPPs (GenCos) and RCITs (LDCs)

13. Marketer
1
Computational Model
𝑢(𝑞, 𝑇, ∅)
𝑢(𝑞, 𝑇, ∅)
Valuation function of customer
provided to each sellerQuantity
of gas
Price for
gas
Preference
type
𝑣1(𝑞, 𝑇, ∅)
𝑣2(𝑞, 𝑇, ∅)
WTP for
secondary
release
capacity
Price setter for firm capacity
Price setter for different
contract types
Marketer
2
Marketer
3
Pipeline
Company
Producer
Consumer
1
Consumer
2
Consumers/LDCs can be on
interruptible or firm contracts for
commodity and capacity
Marketer-consumer bilateral transactions (with or without bidding)
Transactions regarding sale of capacity
Transactions regarding sale of commodity

14. Computational Model (contd.)
𝑢𝑖 𝑠𝑖, 𝑠−𝑖 = 𝑢𝑖 𝐺, 𝑇, ∅ = ∅𝑉 𝐺 − 𝑇
𝐸𝑢0 𝑠𝑖, 𝑠−𝑖 = 𝑃𝑙 𝑇𝑙 − 𝑐𝐺𝑙 + 𝑃𝑢(𝑇 𝑢
− 𝑐𝐺 𝑢
)
𝐺𝑖 ≤ 𝛽𝐶𝑟
5
𝑖
𝐺𝑖 ≥ 0
55
𝑖
𝐺𝑗 = 𝑑𝑒𝑚𝑎𝑛𝑑
5
𝑗
∅𝑙 𝑉 𝐺𝑙 − 𝑇𝑙 ≥ 0
∅ 𝑢 𝑉 𝐺 𝑢 − 𝑇 𝑢
≥ ∅ 𝑢 𝑉 𝐺𝑙 − 𝑇𝑙
s.t.
s.t. 𝑇 ≤ 𝑃 𝑔 ∗ 𝑃𝑐
NGPP/Consumer
Gas MarketerM1
M2
M3
C1
C2
𝑢(𝑞, 𝑇, ∅)
Quantity
of gas
Price for
gas
Preference
type
∅𝑙 or ∅ 𝑢 are of type non-firm and firm
contracts where
∅𝑙 = bundle (G𝑙, 𝑇𝑙)
∅ 𝑢 = bundle (G 𝑢, 𝑇 𝑢)
And the marketer chooses {∅𝑙, ∅ 𝑢} to
maximize its profit
EnergyTech 2015

15. Computational Model (contd.)
M1
M2
M3
C1
C2
• Posed as a constrained optimization problem
• Optimization objective: Marketers’ profit
• Constraints: Capacity, Feasibility
• Mass balance
• Demand: From NGPPs
Marketer-NGPP interaction
max ∑ 𝑃𝑐𝑜𝑚,𝑚,𝑖𝑗 𝐺𝑖𝑗𝑐 ∗ 𝐺𝑖𝑗𝑐 − ∑ 𝐶𝑔𝑎𝑠 𝐺𝑖𝑗 ∑(𝑓𝑖𝑗 ∗ 𝐶𝑖𝑗)
NG Dispatch model
to each NGPP
Electricity Market
Spot price, Allocated
quantity
Electricity Dispatch
Overall Structure of Analysis
𝐺𝑖 ≤ 𝛽𝐶𝑟
5
𝑖
𝐺𝑖 ≥ 0
55
𝑖
𝐺𝑗 = 𝑑𝑒𝑚𝑎𝑛𝑑
5
𝑗 EnergyTech 2015

16. Modeling of Unequal Access
• Focus on Secondary Release Capacity Market and Spot Market
𝑃𝑐: Pipeline Capacity 𝐷𝐿𝐷𝐶: RCIT Demand 𝐶𝑟: Spot gas on Secondary Market
𝛽 = 1 −
𝐷𝐿𝐷𝐶,𝑑
𝐷 𝑎𝑣
𝐶𝑟 = 𝑃𝑐 − 𝐷𝐿𝐷𝐶
Better models of 𝛽 under investigation
𝛽: capacity available to electric consumers − measure of unequal access
EnergyTech 2015

17. Massachusetts Case Study to Compute Cr, 𝛽
Gas Node
1
M1 M2 M3 M4 M5
NGPP1 NGPP2 NGPP3 NGPP4 NGPP5
Gas Node
2
Gas Node
4
Gas Node
5
Gas Node
4
Gas Node
5
• From actual monthly gas demand data, daily gas demand (LDC and NGPPs) calculated for state of
MA from Sept 2014 – April 2015
• Actual data from five main receipt point nodes from the Algonquin pipeline
• Assume 5 marketers of natural gas and 5 NGPPs owned by one generating firm
• The generating firm has equal or unequal access to gas with the marketers (as LDCs)
• Each marketer is tied to one node, and each of the 5 NGPPs are tied to one node where each
marketer can sell gas to any of the 5 NGPPs
EnergyTech 2015

18. Gas Dispatch to Gas Bids given Equal vs. Unequal Access to
Secondary Release Capacity Market (SRCM)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
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19
22
25
28
31
34
37
40
43
46
49
52
55
58
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91
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97
100
103
106
109
112
115
118
121
124
127
130
133
136
139
142
145
148
151
GasDispatch/GasBid
Ratio of Gas Dispatch to Gas Bids given Equal Access to SRCM Sept 2014 - Jan 2015
D1/B1 D2/B2 D3/B3 D4/B4 D5/B5
0
0.1
0.2
0.3
0.4
0.5
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0.9
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GasDispatch/GasBid
Ratio of Gas Dispatch to Gas Bids Given Unequal Access to SRCM Sept 2014 - Jan 2015
D1/B1 D2/B2 D3/B3 D4/B4 D5/B5
Zero dispatch implies
inadequate pipeline capacity
Instances of zero dispatch can increase with renewable penetration

19. Summary
Gas
Marketer
Natural Gas
Power Plant
(NGPP)
ISO-NE
Electric
Dispatch
Renewable
Penetration
• Nexus between NG and Electricity is of growing importance
• Our computational model focuses on market and material flow
• Market flow
o Market misalignment – can lead to power imbalance
o Unequal access to gas – with growing renewables, can lead to increased instances of zero
dispatch
IEEE 118-bus Electricity Network
EnergyTech 2015
Natural Gas Network

20. Work in Progress
Gas
Marketer
Natural Gas
Power Plant
(NGPP)
ISO-NE
Electric
Dispatch
Renewable
Penetration
• Obtain accurate data for NGPP curtailments
o How often do NGPPs get curtailed the gas they bid for and can’t produce what the ISO
schedules them?
o Complete or partial curtailment? On what timeline?
• Better modeling of market flow
• Modeling of material flow
• Interconnection with dynamic market mechanisms for electricity dispatch
IEEE 118-bus Electricity Network
EnergyTech 2015
Natural Gas Network